1997 VALUATION ACTUARY SYMPOSIUM PROCEEDINGS TABLE OF CONTENTS TITLE PAGE Session 1: Session 2: Session 3: Session 4: Session 5: Session 7: Session 8: Introduction and Overview Charles D. Friedstat, Moderator Donna g. Claire Robert E. Wilcox Life and Annuity Valuation Issues James W. Lamson, Moderator Louis M. Pirog Edwin R. Reoliquio Practical and Theoretical Considerations in Strengthening Reserves Based on Cash-Flow Testing Steven A. J. Sedlak, Moderator Sue Ann Collins Edward L. Robbins S. Vincent Zink Investment Strategies in an Asset/Liability Management (ALM) Context Frederick W. Jackson, Moderator Douglas A. George Michael J. Hambro Ray E. Heifer, Jr. Health Cash-Flow Testing Kevin J. Borchert, Moderator Kenneth James Hammond Donna C. Novak Variable Annuities -- Modeling Issues Thomas C. Campbell, Moderator Duncan Briggs Harry R. Miller Health Risk-Based Capital Donna C. Novak, Moderator William C. Weller 23 59 95 139 175 207. 111
TABLE OF CONTENTS TITLE Session 9: Session 10: Session 14: Session 15: Session 16: Session 17: Session 18: Equity-lndexed Products Overview Gregory P. Henke, Moderator Charles M. Butts, Jr. Asset Modeling Concepts Elizabeth A. Ward, Moderator David E. Canuel Sources of Profits.Christopher M. Strom, Moderator H. Neil Lund William P. Morrow, Jr. Daniel Edward Rubin Life Modeling Harold E. Forbes, Moderator Douglas J. Knowling Thomas Nace Louis M. Pirog Equity-Indexed Products: Valuation Issues Edwin R. Reoliquio, Moderator Noel J. Abkemeier Errol Cramer H. Michael Shumrak Market Value Measures: Duration Analysis and Economic Surplus Frederick W. Jackson, Moderator David N. Becker Cindy L. Forbes Douglas A. George Appendix I Appendix H Practitioners' Forum I Michael E. Mateja, Moderator Alastair G. Longley-Cook Barry L. Shemin PAGE 231 271 301 321 351 377 415 423 433 iv
TABLE OF CONTENTS TITLE Session 20: Session 21: Session 22: Session 28: Session 31: Session 35 Session 36: Financial Performance Measurement Hans J. Wagner, Moderator John S. Tillotson Advanced Topics in Annuity Modeling Peter D. Tilley, Moderator Russell A. Osborn Francis P. Sabatini Practitioners' Forum H Robert A. Lyle, Moderator Gerald A. Lockwood S. Michael McLaughlin Stephen N. Patzman Regulatory Topics Troy J. Pritchett, Moderator Kerry A. Krantz Mergers and Acquisitions Daniel J. Kunesh, Moderator Deborah A. Gero Steven H. Mahan Establishing the "M" in "ALM" Francis P. Sabatini, Moderator Albert V. Sekac Ask the Experts W. Michael Pressley, Moderator Douglas C. Doll Michael E. Mateja Edward L. Robbins PAGE 465 489 521 553 581 613 637 V
1997 VALUATION ACTUARY SYMPOSIUM PROCEEDINGS CONTRIBUTORS Noel J. Abkemeier, FSA, MAAA, Consulting Actuary, Milliman & Robertson, Inc David N. Becker, FSA, MAAA, Vice President & Chief Actuarial Officer, Lincoln National Life Insurance Company Kevin J. Borchert, FSA, MAAA, Associate Group Actuary, Fortis Benefits Insurance Company Duncan Briggs, ASA, FIA, Tillinghast-Towers Pert'in Charles M. Butts, Jr., Vice President, Aurora Consulting, Inc Thomas A. Campbell, FSA, MAAA, Assistant Vice President and Corporate Actuary, The Hartford Life Insurance Companies David E. Canuel, Managing Director, Charter Oak Capital Management, Inc. Donna R. Claire, FSA, MAAA, President, Claire Thinking, Inc Sue Ann Collins, FSA, MAAA, Tillinghast-Towers Perrin Erroi Cramer, FSA, MAAA, Senior Actuary and Director, Allstate Life Insurance Company Douglas C. Doll, FSA, MAAA, FCA, Titlinghast-Towers Pen-in Cindy L. Forbes, FSA, MAAA, Vice President, Risk Management, Manufacturers Life Insurance Company Harold E. Forbes, FSA, MAAA, Actuary, Milliman & Robertson, Inc. Charles D. Friedstat, FSA, MAAA, Director, KPMG Peat Marwick LLP Douglas A. George, FSA, MAAA, Partner, Avon Consulting Group LLP Deborah A. Gero, FSA, MAAA, SunAmerica Inc. Michael J. Hambro, FSA, MAAA, Vice President and Actuary, National Life Insurance Company Kenneth James Hammond, FSA, MAAA, Group Finance Actuary, Sun Life Insurance Company Ray E. Heifer, Jr., Managing Director, Scudder Insurance Asset Management Gregory P. Henke, FSA, Goldman Sachs & Co vii
CONTRIBUTORS Frederick W. Jackson, FSA, MAAA, Vice President, Scudder Insurance Asset Management Douglas J. Knowling, FSA, MAAA, Tillinghast-Towers Perrin Kerry A. Krautz, FSA, MAAA, Valuation Actuary, Florida Insurance Department Daniel J. Kunesh, FSA, MAAA, FCA, Tillinghast-Towers Perrin James W. Lamson, FSA, MAAA, Managing Principal, Actuarial Resources Corporation Gerald A. Lockwood, FSA, MAAA, Senior Vice President and Corporate Actuary, Union Central Life Insurance Alastair G. Longley-Cook, FSA, MAAA, Vice President and Corporate Actuary, Aetna H. Neil Lund, FSA, MAAA, Vice President and Chief Actuary, Montgomery Ward Life Insurance Company Robert A. Lyle, FSA, MAAA, Vice President and Corporate Actuary, Aid Association for Lutherans Steven H. Mahan, FSA, MAAA, Principal, KPMG Peat Marwick LLP Michael E. Mateja, FSA, MAAA, Managing Director and Chief Actuary, SS&C Analytics S. Michael McLaughlin, ASA, MAAA, FIA, Partner, Ernst & Young LLP Harry R. Miller, FSA, MAAA, Vice President and Life Actuary, ING FSI North America William P. Morrow, Jr., FSA, MAAA, Senior Advisor, Liberty Insurance Group Thomas Nace, FSA, MAAA, Vice President, PolySystems, Inc Donna C. NovaK ASA, MAAA, Deloitte & Touche LLP Russell A. Osborn, FSA, MAAA, Associate Actuary, Nationwide Financial Services Stephen N. Patzman, FSA, MAAA, Vice President and Corporate Actuary, USAA Life Insurance Company Louis M. Pirog, FSA, MAAA, Actuary, Aetna W. Michael Pressley, FSA, MAAA, Tillinghast-Towers Perrin viii
CONTRmUTORS Troy J. Pritchett, FSA, MAAA, EA, Milliman & Robertson, Inc. Edwin R. Reoliquio, Senior Vice President and Chief Actuary, SunAmerica Inc. Edward L. Robbins, FSA, MAAA, Principal, KPMG Peat Marwick Daniel Edward Rubin, ASA, MAAA, Nationwide Financial Services Francis P. Sabatini, FSA, MAAA, Partner, Ernst & Young LLP Stephen A.J. Sedlak, FSA, MAAA, Vice President and Corporate Actuary, Nationwide Financial Services Albert V. Sekac, FSA, MAAA, Investment Actuary, American General Corporation Barry L. Shemin, FSA, MAAA, Senior Vice President and Corporate Actuary, John Hancock Mutual Life Insurance H. Michael Shumrak, FSA, MAAA, Managing Director, SS&C Analytics Christopher M. Strom, FSA, MAAA, Actuary, PolySystems, Inc. Peter D. Tilley, FSA, MAAA, Vice President.of Asset and Liability Management, Great-West Life Assurance Company John S. Tillotson, FSA, Second Vice President, Transamerica Occidental Life Hans J. Wagner, FSA, MAAA, U.S. GAAP Actuary, National Mutual Holdings Ltd Elizabeth A. Ward, FSA, MAAA, Managing Director, Charter Oak Capital Management, Inc. William C. Wener, FSA, MAAA, Senior Actuary, Health Insurance Association of America Robert E. Wilcox, ASA, MAAA, FCA, National Director, Insurance Regulatory Consulting, Deloitte & Touche LLP S. Vincent Zink, FSA, MAAA, Vice President, Finance, Ohio State Life Insurance Company ix